RAB Capital, the hedge fund best known for buying shares in Northern Rock before it was nationalised, issued a profits warning after the market closed tonight, admitting it would need to make cuts to its 100-strong workforce.

Barely two weeks after the new chief executive, Charles Kirwan-Taylor took the helm, the loss-making group said the unspecified number of job losses would cause a "material exceptional charge" of £5.5m. In a statement rushed out before the official stock market regulatory news services closed, Kirwan-Taylor stressed that the funds it ran were performing well and the group had a strong capital and liquidity position.

Even so, the cost base was too high compared with its expected revenues and the group "had concluded that its financial results for the year to 31 December 2010 are likely to be significantly below current market expectations".

Kirwan-Taylor said: "We have decided it is necessary to address our cost base but remain fully confident in our main investment strategies and that we will continue to deliver strong risk-adjusted returns for our investors."

At the half-year stage, the group's six-month losses were £3.3m, against a £2.7m loss a year before, and it said its headcount and fixed costs had fallen from £28m to £18m. Then this month chief executive Stephen Couttie suddenly quit, putting Kirwan-Taylor, who had been chief investment officer, in to the top job.

Couttie had been appointed in the wake of the losses from its 8% stake in Northern Rock and replaced Philip Richards, the founder of RAB, who still runs the "special situations fund" in which the stake in the troubled bank had been held.

The firm has struggled to regain its status since the Northern Rock investment and the special situations fund has continued to dent the investment performance.

The group reminded investors tonight that the special situations fund had suffered from a "reduction in value of a substantial position". While it did not identify the investment, it is believed to be in Falklands Oil & Gas, which has been hit hard after giving up on a well off the coast of the south Falklands.

RAB's shares have also been ravaged on the stock market. At their peak before the Northern Rock crisis they traded at more than 100p. They closed tonight at 13p – before investors had an opportunity to react to the surprise trading update.

The fund stressed that while it was suffering deepening losses, its assets and investments were valued at £93.6m.

"The total estimated impact on the group's free cash loss after taxation for the year including exceptional charges is expected to amount to less than 6% of this figure," RAB said.